Guidelines on Company Taxation. SEC (90) 601 final, 20 April 1990

Full text

(1)

~OMMI S S

ION OF THE EUROPEAN COMMUN

I TIES

IIJC(90)601 fInal

Brussels, 20 April 1990

COMMISSION COYMUNICATION

TO PARLIANENT AND THE COUNCil

(2)

Gu I de II nes on company

(communication from the commission to the Counc II and to the European Par II ament)

1.

The purpose of this communlcat Ion Is to set out the guidelines which

the Commission plans to follow In the field of company taxation and the measures which It thinks shoUld be taken at Community level to create a company tax env Ironment

ta Ilored to the estab

II shment and

further

deve lopment of the

Interna I market.

2.

The first part of the communication Is given over to an examination of the tax problems that will need to be resolved between now and complet

Ion

of the Internal market by the end of 1992. The general analysis Is

supplemented by an account of the measures that should be taken as a matter

of pr lor I ty

between now and 31 December 1992.

The second part 8x.

amlnes the procedure to be followed In the face of closer Integrat Ion of Member States' economies.

I NTRODUCT ION

A tax strategy geared to the requirements of economic Integrat Ion

3.

According to conventional economic analysis, any form of company

taxation Is liable to bring about economic distortions (lack of neutrality) because It may give rise to decisions on the location, nature and financing

of

Investment would not have been taken In the absence of company taxation.

Such distortions ar Ise because company taut Ion Introduces a bias Into the

(3)

the after-

tax

rate of

return to

the

Investor. It

should be

pointed

out

that

In the Communi ty context the extent of this tax bias on an

Investment

proJect

may

vary

between

Member States depending On

differences In

the tax

base,

the

rate of

tax

and,

sometimes, the

character 1st

IC8 of the tax system.

4.

From a

theoretical

viewpoint, the possibility

could

therefore be

considered of harmonizing national

company tax systems at

community

level so as to enSure complete tax neutrality.

5.

However, there

are a

number of

basic

considerations why

the

Community should hold back on the harmonization of company tax

systems

In

the

Member States,

particularly

In

view of

the

principle

subsldlar Ity.

Member States should

remain free to

determine their

tax

arrangements,

except where these would lead to maJor distortions.

A further

analysis Is

necessary to

check the

possible

existence and

extent of

such distortions, and

part Icularly

those which

might affect

decisions as to the location of

Investment.

Quite apart from the differences In the tax burden on

companies, there

are many

other

factors determining the decisions of

direct

Investors.

These Include, for example, the need to locate a proJect close to

the

market

served,

differences I

I abour

costs, the

qua II ty of pub II c

services and economic

Infrastructures.

6.

In

v lew of

these

factors,

the

commission has

reached

the

conclusion that community action

should

concentrate on

the

measures

essential for completing the

Internal market. The

Important question

of the advisability and possible forms of the harmonlzat Ion of company

taxation should be

reexamined closely and on

new bases

before

any

(4)

FIRST PART

The tax prOblems to be

resolved and

the measures to be

before 1993

lemented

The ma

I n tax

prob I ems posed by cross-

f ront I er cooper

a t Ion

7.

The Single

European Act defines

the

Internal market as "

an

area

without

Internal frontiers

In

which the

free

movement of

goods,

persons, services and capital Is

ensured.. .

8.

At the

present

tillie, there

are

12

tax

territories

In

the

Commun I ty ,

each wi

th

I ts

own tax

system.

Each of

these

systems Is

complete as

regards

the

Internal

situation of

the

Member State

conc.

erned. By Its

very nature,

national

legislation provides

for

the

unilateral

tax

treatment of

the

activities of

companies.

That

leglslat Ion

frequent Iy

entails

tax

treatment

which

places

cross-

frontier

activities at

disadvantage

compared with

national

activities and

leads

In

particular to

double taxation, and this

turn places an equivalent extra burden on companies.

9.

Now, one of the alms of the Internal market Is to enable

companies

to

operate

throughout

the

Community without

failing

foul

legislative

frontiers or

obstacles. The

economic benefits of

the

Interna I

market will

f low

from

the

expans Ion

of companies

transnational activities.

National legislation

must

therefore

adapted to

that

objective. Given

the

magnitude of

the

differences

between national systems, community measures are heeded.

10.

AI though

bilateral double taut

Ion agreements have

In some

cases

helped to reduce the extent of

these

obstacles, they are far

from

providing a

satisfactory

answer to

the

requirements of

the

Internal

market. This Is because they do

not

cover all

bilateral

relations

between

Member States,

they do

not

achieve

complete abolition of

double taxation and In particular

they

never

provide any

uniform

solution

for

triangular

and

multilateral

relations

between

Member states.

(5)

(a)

11.

In the case of the setting-up of transnational companies, the

obstacles encountered stem from the system of taxation of

capital

gains

realized on

mergers, divisions, contributions of assets or

exchanges of

shares

between

enterprises

frOlll different Member States.

Although taxation of

such

operations within a

Member State

generally deferred until the

capital gains are

actually .

reallzed,

there Is no

such possibility for transnational operations, where

the

resu I tant

tax

cost may

be

such that

they

are no

longer

worthwhile.

Such obstacles are

not

restricted only to

companies with

share

capital but may

also affect

enterprises which do

not have

legal

Personality, whiCh

Is the case, for example, with many small and

med lum-s I zed

firms.

(b)

12.

In the case of

the

functioning of groups of

companies, the

tax obstacles are

manifold. The

most

Important obstacle lies

the withholding taxes applied by a large maJority of Member States

to d.

lvldends dlstr

Ibuted by

subsidiary

In a

part Icular

Member State to

I ts parent

company I ~ another Member State.

13. A

second

category of

obstacle

Involves

double

taxation

resul Ung

from

adJustments In

transfer

prices

made

Member States according to different rules and procedures.

Such

economic

double

taxat Ion

ar Ises

between

associated

enterpr Ises

where transact

Ions are

not

carr led

out

at

market

prices

but

at

Internal

prices,

known as "

transfer prices

Nat lona I tax admlnlstrat Ions may decide to

adJust these pr

Ices If,

In their view,

they do not

correspond to the prices that would be

f I xed

between

Independent enterpr

lees

under

condl t Ions

unrestricted

competition. Where the upward adJustment of a

price

which Is deemed to be

too

low by the

tax

administration In a

Member State

Is not accompanied by a

corresponding reduct

Ion

the tax base In the other Member

State, double taxat

Ion occurs.

(6)

At the

moment such double taut

Ion can

admittedly be

resolved by

way of

the

amicable procedure

provided for

In

bilateral

conventions, In accordance with

Article 25 of

the

model

OECD

Convent Ion.

However, while

the

amicable procedure

must

Initiated

In all cases, It does not

require the

administrations

concerned to

reach an

agreement. In

pract Ice,

therefore, th

I s

Instrument has

shown Itself Incapable of resolving all

cases of

double taxation.

(c)

14. A third

factor

penalizing

transfront ler

activit les

Is

the

absence In

many

cases of

national

provisions

allowing an

enterprise to set against Its profits the

losses

Incurred by

Its

permanent estab II shments or subs

I dl ar les

abroad. 1

The

Inequality of

treatment where transfrontler activities are

concerned Is

particularly

striking

In

the

case of

permanent

establishments.

Whereas the

results of

establishments In

the

Member State In which the head office Is

located are an

Integral

par t

of

the

resu I ts

of

the enterpr

I se,

the mere

exl stence

of a

frontier

between a

permanent establishment and

the

head office

means, In .

some Member states,

that

losses

Incurred by the

foreign

permanent estab II

shment are not

deduct I b

I e

from prof

I ts made by

the head

office. As a

result, the

enterprise pays an

amount of

tax that Is excessive In terms of Its total net results, since tax

Is applied to

the results

achieved solely In the Member State

which the head office Is located.

This

problem

does not

arise In

Member States which

take

Into

consideration

the

profits or

losses of

foreign

permanent

establishment and

which,

In

the

case of

profits, avoid

double

taxation by

crediting the

foreign

tax

against their

own tax

(Imputation

or

tax-credit

method). In

addition,

some

Member States which

exempt the

profits of

the

foreign

permanent

establishment allow

deduct Ion

of

foreign losses. To

the

extent

that the

permanent establishment earns

profits

In a

subsequent

year

, the sums

deducted are rEI-

Incorporated Into the head off Ice

resu I ts and

taxed.

Such

Inequality of

treatment

In

respect of

transfrontler

activities also

affects

subsidiaries although the legal position

Is not the same as In the case of permanent establishments. This

Is

because subsidiaries

have legal

personality

and, even

where

subsidiaries set up on

national territory are concerned, not

all

Member States allow

their

losses to be set off against the

parent

company

profits

and, where

thJs

t~ allowed, It

Is subJect to

restrictive conditions.

(7)

(d)

15.

There are

also obstacles that Impede the

flows of

royalties

and Interest

within groups of

companies. While

such

payments do

not

attract

withholding

tax

within a

Member State,

widely

differing rates of withholding tax are levied In the case of most

International relatlons.

In

theory, such

withholding taxes

can,

It

Is true, be

set off

against the tax payable by

the

recipient

enterpr Ises. However, leaving aside

the

fact

that

this

Is not

always possible,

Implementation of

the

provisions of

bilateral

agreements

laying

down

reduced

rates

Invariably

entails

administrative formalities that are often cumbenJome and costly.

16. The

removal of

all of

these

tax

obstacles

currently

preventing or

Impeding cross-

frontier business activity within the

community Is one of the Community

s priority

tasks. To

that end,

It

Is necessary to

Implement as soon

as

possible a

series of

measures whose adoption should be facilitated

by

the fact

that

they do not

affect the essence of national tax

systems and their

budgetary consequences are rei at I ve

I y

11m I

ted.

Measures to be Implemented as soon as possible

17. The

Commission has

already

presented three

proposals for

Directives on this

subject

together with a tax measure

linked to

the

proposal on

the

Statute for a

European

company. It

will

shortly present two further

proposals and It Intends to

take

certain measures relating to the tax environment of companies"

(1)

Proposa I s a I ready

presented

18. The

Commission has put forward a package of three proposals

for

Directives

designed to

encourage cooperation

between

enterpr I ses from

different Member States:

(a)

The "

mergers

" Direct I

19. This

proposal provides for any

capital gains

arising from a

merger, a

division or contribution of

assets or an

exchange of

shares to be

taxed not at

the time of

the operat Ion In Quest

Ion

but only

when capital

gains are

actually

realized. It

specifies

the conditions which Member States may Impose on the deferral of

taxat Ion.

The adopt.

lon of

this

proposal Is

Important for

the

actual

formation of European companlee, by merger, which Is

the principal

method of

format Ion

provided for

In

the draft

Statute for a

European company presented by the commission In August 1989.

(8)

(b)

The "

parent companies and subsidiaries" Directive

20. This

proposal Is Intended to eliminate the double

taxation of

the

dividends distributed by

subsidiary established

In

one

Member State

to

Its

parent

company established

In

aoother

Member State. To that end, It provides for:

the

Member State

In which

the

subsidiary Is

established to

abolish any withholding tax;

the Member State In which the parent company Is established to

exempt the

dividends or else

to

tax them while at

the

same

time

Imput Ing the tax charged In the Member State In wh Ich the

subsidiary Is

established against Its own

tax.

(c)

The "

arbitration procedure" Directive

21.

The

third

proposal

provides for

the

Introduction of

procedures designed to

ensure, within specified

periods,

the

elimination of double

taxation that occurs

In connection with the

adjustment of the profits of associated enterprises when an upward

adjustment In an enterprise

profits

In one

Member State Is not

accompanied by a corr.espondlng

adJustment In the

results of

the

other

enterprise

In

another

Member state. To

that

end, It

provideS, firstly,

for

the

general

application of

the

amicable

procedure

already

provided for

In

bilateral

double

taxation

agreements and, secondly, for

the

Introduction of an

arbitration

procedure which

must be In.

ltlated automatically

In the

event of

the failure of

the amicable procedure and which must

lead to the elimination of double taxation.

22. As

most of

the

prOblems raised by

these three

very

old

proposals

In

the

Council

have been resolved,

the

commission

cons I ders

It essent I a I

for the

Counc II to

adopt them as

soon as

po.

sslble, as It was urged to dO by

the

European Council at

Its

meeting In Strasbourg In

December 1989.

(2)

Proposa I s to be presented

(a)

Need for account to be taken of fore

I gn prof I ts

or losses

23.

In Its

proposal for a Council Regulation on the Statute for a

European

company, the commission Included provisions (Article 133) stipulating that, where, during a

tax

period, the

aggregation of

prof I ts

and

losses of

the

permanent estab

II shments wh I ch

European company has

In

II Memb~.r State or third country

results

net

loss. that

loss may be offset . aGainst the prof

I is

of

the

European company In the Member State where

It

Is resident for

tax

(9)

24.

The

Commission considers

that

the

provisions

permitting

foreign

losses to be

taken Into

account at company level

should

apply to

all

companies

engaged In

transnational activities.

will therefore shortly present a proposal for a Directive covering

all

companies Irrespective of

legal status,

Including

small and

medium-sized firms.

That

proposa I w I II

a I so

dea I

subs Id lar les established abroad.

losses of

wi th

the

treatment of

25. The

practical

Implementation of the solutions set out In the

two

previous

points will

be

greatly

facilitated If

all

Member states apply the same arrangements for the carry-

forward or

carry-

back of

losses for

tax

purposes. Those

arrangements

currently differ -

In

some

cases

appreciably - as regards . the

possibility of carry-

back,

the

length of

the

period

carry-

forward

and

the

definition of

the

losses which may

carr led forward or back.

In 1984, .

the

Commission presented a

proposal for a

Directive on

the harmon

I zat Ion

of

systems for the carry-

forward and carry-

back

of

losses for tax purposes, on wh

I ch

the Counc II has not yet taken

decision. It

urges

the

Council to resume Its

examination of

that proposal , which has been held UP

for a

number of years, with a view to Its speedy adoption.

(b)

The

abolition of

withholdin

taxes

and

royal ty

payments within groups of companies

Interest

26.

The

Commission will

shortly

propose that

these

taxes be

abolished altogether.

Arrangements could be

made for

their

gradual abolition to help those Member states which are

major net

Importers of

capital and

technology and for

which the

taxes on

these payments represent an appreciable source of tax revenue.

(3)

Other measures to be taken

(a)

Rules and regulations governing transfer pricing

27. The

Implementation of

the

provisions

relating

arbitration

procedure will guarantee the

abolition of

double taxat Ion occurr Ing

between assocIated enterpr

Ises.

to

the

econom I c

While

that

procedure

undoubtedly

represents an

Improvement

compared with the present situation, the best solution would be to

prevent any double taxat Ion.

(10)

The

commission therefore

proposes to

carry

out a

systematic

examlnat Ion

of

Member states' rul.

es

and

regulat Ions

on

transfer

pricing

(the

differences

In which are the main cause of

double

taxation) with a view to

making them more uniform. It will also

examine with

the

Member States

the

conditions

under

which a

cooperatIon procedure

could

be

established

between

the

administrations concerned where one of them Intends to adJust the

profits

of

an

associated

enterprise. The

organization of

simultaneous tax

checks on

companies or establishments of

multinatIonal

company situated

In

different Member

States

could

greatly facilitate such cooperation.

(b)

Transparency Of Incent

Ives

28.

In almost all the Member States company taxation Is used as a

vehicle for Incentives through which economic or structural policy

obJectives are

pursued. Of

course, where

such measures take the

form of aid, the Treaty rules on competition apply.

The difficulty

stems

from the lack of

transparency of

these

specific tax

measures. Most of them take the form of special tax

rules and

regulations

concerning the

tax

base.

They are

also

Increasingly making the tax base more complicated, for

example In

the

field

of

depreciation.

In

addition,

for

small

and

me.dlum-slzed firms, this lack of transparency and complication may

be

prejudicial and may

Impecle the development

of cross-

frontier

act I v I tl es .

There Is

absolutely no

Intention of questioning the aim

of

these

tax Incent

Ives, provided that the Treaty obllgat

Ions are observed.

However, Member States should examine their legislation to ensure

that

Incentives

applied

are

more transparent. For

example,

Incent Ives In the form of base

reduct Ions could

be converted Into

tax credits or rate reductions.

( c) DIrect app

II cat Ion of the Treaty

29.

Furthermore,

certain fields,

part Icular

, the

measures whl

treatment.

In

the

absence of

community legislation

It

Is essential

that the

Treaty be

applied.

free movement of capItal cannot be

hindered by tax

(11)

-

10-SECOND PART

Problems of company

taxation raised by the

development of the

Internal

market

The need for new longer-

term guidelines

30. The

problems of

tax

harmonization at Community level

were

examined as long ago as

the first

half of the

1910s by various

ad hoc

committees, In

particular the

Werner committee,

In

the

context of

the

approach to

economic

and

monetary

union.

Subsequently, In 1915, the Commission presented a proposal for a

Direct Ive on the

harmonlzat Ion

of

sYstems and rates of

company

taxation

In the Member

States. Its

aim was to

limit the economic

double taxation of distributed dividends.

That proposal, which has not been discussed by the Council

or

the

European Par II

ament for more than ten

years now, was

based on a

centralized

approach to

tax

harmonization and

economic

and

monetary union.

Since

then, and

In part

Icular since the

Single European Act

and

the

report on

economic

and

monetary

union

In

the

European

Commun I ty

drawn up In

Apr II 1989

at

the

request of

the

European

Council, a new approach to economic Integration has been

defined.

This approach gives priority to the

coordination and

approximation

of policies rather than to systematic use of

harmonization. It .

also clearly

In keeping with

the

principle of

subsidiarity

(see

First Part).

In the tax field, priority has been given to removing tax barriers

to

completion of

the

Internal market

and,

In

particular, to

abolishing all forms of double taxation between now and 1993.

Under the circumstances, the 1915 proposal, which, In any case, no

longer corresponds to the current situation

In the

community or

world-wide,

has

ceased to

meet

the

needs

associated with

development of

the

Internal market

beyond

1992.

Moreover, some

Instances of double

taxation between Member States can be

resolved

In other ways.

(12)

31. However

the

matter

cannot

be

left

there. With

the

completion of the Internal market between now and the end of 1992

physical and

technical barriers will

disappear and the differences

between tax

systems In

the

Member States

may

we II

become

Increasingly apparent and

Influence

Investment decisions

In this

situation of

more rapid

Integration, the

question arises as

whether further act

Ion on direct company taut Ion Is

necessary at

Communi ty

level.

32. It

Is true

that

a I ready

const I tutes

national

leglslat Ion

gradual

complet Ion that phenomenon.

competition between the different economies

powerful

stimulus to

the

ap-prox Imat Ion

In

the

company taxation field

and

the

the I

nternal

market will

fur ther

amp II fy

For example, the tax base and

the rates of

corporation tax have

undergone fairly

marked

changes In

recent

years

In

most

Member StateS

following the

reform which was

undertaken by

the

United Kingdom

and

the

United Stetes

and

which

consisted of

cutting

nominal tax rates while at

the same

time

broadening the

tax

base. Th

I s

reform offers

the

advantages of transparency and

simplification,

which

should

prove particularly

beneficial to

sma II and med I um-s I zed

firms.

33.

However, the

question arises ,

as to whether

In view of

the

relatively major differences between Member

states as

regards the

tax

burden on companles,

this

spontaneous alignment will

alone

be

sufficient to

meet

the

needs of

an

Integrated market and

whether It will lead to economically desirable taxation.

Finally, any

attempt by

Member States to

outbid each

other

too

much In

cutt Ing

company taut

Ion

would

not be

wi thout

Its

problems,

whether In

terms of loss of

resources for

national

budgets or of

equity as

regards Its Impact on the distribution of

the tax burden within each Member State between the various taxes

and charges.

Study of new proposa

34.

Under these

conditions and In order to be

able to e.

xamlne

whether or not new measures are advisable, the commission sees a

need for a

fresh studY which will have to

take account, firstly,

of

the current state of, and

prospects for

, community

Integration

and

, second I y ,

of

the

resu I ts

"of

the ma

Jor

tax

reforms of

the

1980s, both Inside and outside the community.

(13)

35. Th

I s

study w

III be

entrusted to a comm I

ttee made up

Independent persons chosen for their expertise. This

committee,

for which the Commission will provide the secretariat, will have to submit Its report within a maximUm period of one year.

The study will have to answer the following main questions:

(a) do the disparities which exist between corporation taxes1 and the tax burdens on companies from one Member State to the next

Induce distortions

In

Investment decisions affecting

the

functioning of the Internal market?

(b) If so, can those distortions be eliminated simply through the

Interplay of market forces and

competition between national

tax systems or ar.

e Commun

I ty

measures requ I red?

(c) Should any action at Community level

concentrate on one or

more

elements of

company taxation,

namely the

different

corporat Ion tax systems, the differences in

tax

treatment

associated with the legal status of companies , the tax base or

rates?

(d) Shou

I d

any

measures

env I saged

I ead

to

harmon I za t Ion

approximation or

the

straightforward

establishment of

framework for national taxation? What would be the effect of

such measures or the absence of such measures on Co/llmun I ty

objectives such as cohesion, environmental protection and fa.

t rea tment of

sma II and med I um-s I zed

firms?

In the light of

this

studY, the Commission will decide what proposa I s for measures It shou

I d

present to the Council.

Stepping-up of consultations

36.

In order to promote cooperat Ion wi th representatives from the

Member States, the Commission considers that consultations should

be stepped up In th

I s fie I

d between those respons

I b I e for taxat Ion polley In the various Member States. Meetings Should be held at

regular

Intervals, at least once or twice a year, to

exchange

Informat Ion

and

viewpoints with the Commission on

the

main

proposals. Such

consultation

should

make It

easier

for

Member States to take account, In pursuing their national tax

policies, of

both the

Impact of

the

Internal market and

the

consequences of those pol icles for the other Member States In the

context of the growing

Integration and sol idarity

between the

Community economies. These meetings should deal not only with the problems which arise within

't-he

COmmunity. but also

with

those

encountered In relatl.ons with

non-member countries.

(14)

- 13 ~

IV. Conclusions

The Commission Invites the

Council and Parliament to:

take note of the withdrawal of the 1975

proposal concerning the

harmonization of systems of company taxation and of

withholding

taxes on

dividends and of the guidelines

resulting from this

communication for

direct

company taxation

In the

light of

completion of the Internal market by the end of 1992 and beyond;

endorse the Commission

s decisions to:

arrange for a study to be made of the

company problems posed by greater economic Integrat Ion;

taxat Ion

step up

consultations

Member states.

In the

company taxation field with

The Commission asks the Council:

to adopt without delay the following proposals which have already been transmitted to It and which are of special Importance for the

estab I I shment of the

I nterna I

market:

the proposal for .

a Directive on a common system of

taxation

applicable to mergers, divisions and contributions of assets

Involving companies from different Member States;

the proposal for a Directive on a common system of

taxation

applicable to parent companies and subsidiaries from different Member States;

the

proposal for a

Directive

Introducing an arbitration

procedure for eliminating double taxation in the event of the

adjustment of prof I

ts between assoc

I ated

enterpr I ses.

to

examine In the

concerning

light of

this

communication the

proposals

arrangements for the taking Into account by the parent company

of foreign resul

ts;

the abolition of wltholdlng

taxes on royalties and .

Interest

payments

(15)

(Situation

aE) at 1.

90)

RELA

nONS

BETWEEN MEM9ER STATES NOT COVERED BY A BILATERAL AGREEMENT.

De:tma.r k

Greooe

Greece

Greece

Spall

Portugal

Po:rtugal

Portugal

~ Greece - Spa.in - IrelaD:i

Iiuxem1:x:::nJ.

- Portugal

Irel.a.t:d

- Luxembourg - Nether J.anjs

Irel.a.t:d.

(16)

~ltU~tlun as

a~

1Y~U

ithholdj

ng tax rates ap

pUcabl~

-.l.

o div1dend p

Clxrnents between

companies

Country in which the distributin

Belgium

company is estahl ished

'Country Tnwh"fch

th"e

recTpTenC

(1)

(2)

company is established ColJntr1 cs

without agreement

Member States

----

Belgium

Denmark Ge rmany

Greece

spain

ranee

Ireland

Italy

Luxembourg

Netherlands

portugal

Un; tad

Kingdom

~on-member count ri as

- -

.- -. .- ~ ~ -

-Switzerland

Uni tcd Sti4tes

Japan

Denfilark (1 )

(?J . Ge rmi1ny

Greece

Spain

France

Irel

(1 )

(?)

(1)

(2)

(1)

(2)

(1)

(2)

(3)

25(25)

10(10)

25(25)

(3)

10(50)

10(25)

0(25)

25(25)

(3)

10(25)

25 (25)

(3)

10(25)

20(25)

(3)

10(50)

25 (25)

(3)

10 (25)

5(25)

25(25)

15 (10 10(SOV'

5 (25)

(3)

10(50)

20(25)

(3)

10(10)

5(10)

10(25)

S(ZOP)

(5)

2S(?:i)

1 ')

(3)

5(10)

(3)

10(25)

10(15)

.

-10(10) 15 10(25) 15

5 (25)

10(25) 15 10(25) 15 10(50) 15 5(25) 15 0(25) 15 10(25) 15 0(25) 15

S(115) '

10(25) 15

Source. International Bureau of Fiscal Documentotion

and

(17)

. .

Ita ly

LlIxcmbotl rg

Hetherlf:1nds

PortutJtI t

Un it ~d

(1)

. (2)

(1)

(2)

(1)

(2)

(1)

(2)

(1 )

----, It

10(25)

5 (7.5) 1-5 (I) 5 (-25)

0 (25)

10(25)

5 (10)

32,1,

10(25)

10(7.5)

(7)

5 (25)

(7)

5 (25)

5(50)

10(50)

0(10) (

5 (25)

(25)

0(10) (

5(25)

0 (25)

0 (10) (

0 (7)

5(25)

5(10)

O((5)32

5(25)

5 nO) (

0 (7)

5(5015

5 (25)

5 (25)

10(25)

0(25)

10(25)

5(10) (

) c,m f

6ls

500)

5(25)

5(10)

10(25)

5(25)

0(10) (

(J'. Kingdom

(2)

---

(7)

20 (B) 15 (8)

(7)

715(8)

I)) 15 (8)'

0 (7)

(18)

Notes :

( 1 ) Rate applicable in the case of a

su1::sta11ti.eJ.hol.d.i.ng; the

mirolIIl1In

peroentage require1 for a

hol.d.i.ng to l::e

oonsidere1 su1::stantialis

iIxiioa:tai in brackets.

(2) Rate applicable in the case of a

m:i.nority hol.d.i.ng.

(;3) Four rates

a.re applie1

deperrlirJg on the

c;1.roumsta.noes:

bearer shares registere1 shares

shares quote1 on the

AtheDs stock

shares DOt quote1 on the

Athe:rJS stock

eKCha.rJge

(4) Rate raiuce:l to 5% if the recipient cornp:myis DOt liable to

Dutc..~ tax

on the same

di vi nemB

(5) Cases whe:reSwiss companies are

oont:rolle1 by Swiss residents.

(6) Rate for a hol.d.i.ng of

at lea.st Iffi.: Iffi..

(7) No tax cre1it grante1.

(8) Tax

crErlit grante1 =

25/75 Of the divideIrl.

(9) Tax

crErlit grante1 =

25/150 of the dividerd.

(10) Rates provided for by the bi

lateral agr-eement in practice the rate of 15 % i~ also applicable in the case of a substantial holding.

(19)

9--TAX

~S

APPLIC'.ART:R 'IO LOSSES

ill

THE STATES

Summa.ry table sbDwiDg the extent to which losses nay he offset wi

thUl

e.ach

Member State am. in

rela.tiOX1S

with other countries.

(i)

Perma:nent esta.b11shInents

reE:i(ien

t in the same State

.a.g the

oampa.ny are

not

iDC1:udai in

the table.

'!'he

profits or

losses of such e.':rt-.e1'1' ;

~hments

are always inoludai in the

company

s results, in all Member States.

Cii)

A "

consortium

Jl\EX1.t)S a ho1d.i-'og company owna:l

by a. grou.

p Of

companies (in

Irelar.d ,

a. IDaXimtun of

five),

e.ach with

(20)

Member State BeLgium Denmark Ge rmany

Spain

France

Greece

L.P

Subsidiary in the Member State

Conso L1dati on (consoLidated profits)

(whol Ly owned

subsidiary)

otfsett log where "Drganschaftff (subsidiary under financiaL, structuraL and economic control)

Permanent forei

gn estab L

i shment

Offsetting with reincorporat1on in a given

order

(Arti 66 !l

!eq

AR-tIR)

Where no a~reement: imputation - Deduction wi

th r(!incorporation where an

agreement provides for exemption

- Where no agreement: imputation - In accordance with agreements: exemption

in principLI? but deduction of losses

with

reincorporation

Consolidation

I Imputation

method

(consoL idate&

profits)

(subsidiary, minimum

hMding

orf.90%).

Consolidation if appLication of: (i) consoL iaated profits

system

(i i)

integrated

profitsi'syst.em I

(sub9idiary~ minimum,

holding of

95('.)

tmputation under worLd profits system if opt ed fo r by

company

Imputation method in

principle... e)(cept

where

the overall resuLt o'

r all permanent

establishments is negative (no deduction losses in such cases)

Subsidiary abroad

Consol idatipn (consol idated profi ts) (wholly owned subidiary) ConsoLidation if application of:

(1) "

consolidated balance sheet

system

" (very limited use

An practi ce)

(ii) provisions for losses in the

fi rst

5 years if

tradi,ng,

within the EEC

, with automatic

rei ncorporat ion

(~rt. 39(S)(D)

(21)

1 reland Consol idation

vhere:

I.mputat ion

method

C 1)

subs i di ary,

miOlll1um

holding

75%

(ii)

consorti um

Italy

Imputat ion

met hod

Luxembourg

Offsetting

where

Organschaft'"

agre9l11ent:

imputation

system

appLies

Agreements

provido

for

exempt ion

(subsidiary,

99%)

wi thout

deduc t i on

losses

Netherlands

Offsetting

where

single

enti ty

Combi net ion

both

methods

status

exerrption with progression in case of

profits

(subs i di

ary,

99%)

OerJuc t ion

and

re i ncorpo rat i

losses

---

-'----Portugal

Canso l

idation

agreement

un; latera l

provisions

(conso l

idated

profi ts)

(subsidiary,

minimum

holding

Agreements

provide

for

imputation

90X)

Un it ed

(22)

IAVX IJI:.:)

Ht.lltM:.:. '" LA

:.u\k(\..I:. N'YLH';AtlU.

5 AU t'AII:J4.NI U.

1NIH!I:.IS lN11(( lNTHlPH(~lS

Situation ou 1.

1990

Etat de ril'

dence

IBellli quelDonemork IAII

emagne I

Greee

IPoYB-BaB !Portugal

I du dubl teur

(1)

I Etot de reeldence

I do benuflclalre

I .

Pay. eons convent

Ion

46(3)

45(5)

215

I .

Etah

lllelllbres

Be I 51 r

que

15( 10) I

DanlllliOrk A I I

-91'8

15(2)

I 10(4)

15(9)

Groce Eepagne Fronce

Irlonde

. 25

Italle

luxembourg

15(2)

Poye-80111

10(8)

Portugal Royoum...un I

I .

ier.

Sulelle

. 0

16(7)

12.

5 I

Etoh-unlll

0(8)

Japan

Source: Internat lanai

Bureou of F Ilcal Documentat

Ion.

(23)

Rema r cue

(1) pas de retenue sur

- les Inter&ts sur dettes commerclales;

- les Inter&ts payes par des banques etablles en Belgique a des banques etrangeres

(2) unlquement d'appllcatlon pour une participation d'au molns 25%; pas

de retenue dans les autres cas;

(3) pour les socletes non-resldentes,

Ie taux est egal au taux de

I' Imp6t des soc letes;

(4) exonerat Ion pour

lEIs Inter&ts payes a

121

Deutsche Bundesbank ou .

121 Kredltanstalt fur W!ederaufbau;

(5) hux du droit Interne avec un grand nombre d'

exceptlons;

(6) a part certaJn\paJements exoner6s;

(7) hux

applicable dans Ie cas

de so.

cletes sulsses contr61ees par

des residents sulss.es;

(8) retenue de 35% sl Ie beneflclalre est LIne socllHe qui detlent

50% des participations dans 121

societe Irlandalse;

(9) retenue de 10% pour res Inter&ts

re I at I fs

aux emprunts garant Is par

des banQues allemandes, a condition que

!es emprunts solent

offlclellement reconnus comme etant dans l' lnter~t economlQue ou

social duPortugal;

(24)

INJXUt.:'K1:.It.NUt.:"'U\~\A.A'\I..LNtL',""""Lt.."'r\UI"'L.""""

",-,,~~~...._~-,L.""'~L.""'~""-~~

,oJ

""'.'

I (tat de resIdence

Idudeblteur

I Etat dElr..ldonce

Idubeneflclatre

I .

Paye sane convention

25

38

25

I 2

25

I 33 1/3 I

32

I 38(3)

12

1 8

15

25

ttablHfllbreo

I Belgique

e 1

5 1

e I

e 1

5 1

8 1

Dcm8lllOrk 1

8 1

- 1

25 1

e 1

5 1

'8

I AI

1-'.

e 1

- 1

8 1

5 1

9 1

IS 1

'9 1

Crece 1

38 1

8 1

- 1

25 1

I Eapogne 1

5 I

" 1

25

6 1

I 5

'9

I "ronce 1

e 1

5 1

6 1

e 1

9 1

5 1

lrlandEl

e 1

1 e.

- 1

9 1

'5

I Holle 1

5 1

8 1

9 1

e 1

- 1

& 1

'2

luxltllbourg

I '

25

18

I 18

15

Poys-Batl I

1 t

e 1

7 I

" 1

8 1

8 1

8 I

e 1

- 1

'5 1

portu!iJCll I

S 1

1& 1

25 1

5 1

'2 1

1 - 1

Ro~1

I t

t 1

'8

e 1

& 1

8 1

8 1

I .

0 I

Payetier.

I Sui... 1

8 I

5 1

5(2)

e 1

5 1

I Etoh-tlnl. 1

t 1

8 1

25 1

5 1

& 1

'8 1

'5 I

I Japan 1

'0

(25)

(1)

J I n

a pas Gte tenu compte de la T. A. que certains pays appllQuent sur les

redevances.

(2) taux applicable pour des socletes sulsses contr~Jees par des

residents sulsse$;

(3) taux appliqUe

;\ 70" du montant brut, c

st-

dlre un taux effectlf

de 21".

(26)

ANNEX: 5

Situation at

1 January 1990

Tab t e: Tax arrangements appliccble to the carry"over of losses

carry-back

,maximum numb'er of

years -

authorized

Carry:-forwartl;. :

maxlmum ~umber Qf years authorized

Commuo;ty Se 19ium Denmark Germany

Greece

Spai n

France

Ireland

Italy

Luxembourg

Netherlands

Per-tugs l

Uryi t eo Ki ngcom

:zz

no ~~mit

no l ;mit

no limit

3. -'

Othet countries

Japan

USH

s....itzer land

-Source:

International Bureau

of. riscal

Documentation for the Member

Stetes...

coopers

' and Lybrand fon the

other

countries-xcept,ons: .

- for-compaI1:i,.e.s:e.stabLisbed a:fter 1 Jemu8ry 19.72,

no Limit on carry-forward of Losses in iir$~

5. y~ar~~

~ for compulsory deprec;ai'ion: no limit on !=C!rry-fo

rward.

Amount L im;ted to DM 10 OO~

000.

4 Five years

for hoteLs

... mines and

factories.

Under ~ertain ~onditions.

Under certain conditions.

As a rule

, a tax period covers two years.

A loss in one ye~r '

C!lu"toma'ticesLl..y c~rried over

'to the

second year of the same period.

;in the case of

F.ederal taxes the loss incurred in one period may' carried forward for three periods.

(27)

NNEX 6

Tab le:

Revenve from corporati on t~x

, 1987

Revenue from corporation tax

"As. a per..ceo:!age

GDP.

As- B. percent-age. .

tota L t~x-~~ven~e

r;omml:l~;

.Be~gium

De:)nia r j(

Spa; n

Germany

. Greece

France

Ireland

10,

Ita ly

Luxembourg

Nether lands

17.

~QrtugaL

On ft e.d Kingdom

Otl:1er

countries

Japan

Swi1:u

land

Us-A

SOlJrce ' OE~J)

(28)

SYSTEME5 D'tilf'OT

lES $OCrETES

,Systemeg d'

Imp8t des soclet.s

Toux de "lmpBt sur

les

Taux dO credit d'

lmpBt pour

IToUX de lu retenue a 10

l(eGnIl ouonu

otlon, avec

soclotes our

Ie beneHclolre resident

18ource pout Ie beneflclolre

lottenuot Ion ou avec euppr...lon I

reeldent

Ide 10 double hillposltlon

I benefice

I benefice non

I en ~ de PlmpSt

I en ~ du dividend. I

leconOlllllque d.s

cUvldondes) I

dlstrlbv.

1 dl.trlbue

I dill eoclete.

I brut

I '

IDm.

.I!!!!!!J!W.

11.

5....t- .on. attenuation

Belgique (1)

Luxeebourg

Poys-Bcis

12.

!IXtt

attenuation

DonGIIIGrk

Empogne

Fronce

1 k

I onde

Portugal

RoyGlllH-Un I

SY8t-!IXtt

","r...lon

11_9'1'

Grec.

Itolle

I~

tlen

1'.

5...lt... .on.

ott.nua~lon

Etotll-Unls

SuJue

12. S...steme ottenuot Ion Japan

43(2) 34(3) 38,

48,

388(9) 34(11)

toux progresslfs 35(13)

43(2) 34(3)

48,

368(9) 34( 11) ( 12)

40(13)

18. 69, 189(7) 189(18)

HI,

28172

11,

25175

de 7,

4 a 12

25(4) 15(5) 38(8)

8(8)

(8) 0(6)

(29)

10.

From 1 January 1989 Belgi1.Ul1 a'bo' i ~::"h~ its relief system for natural

persons who do DOt appropriate

their investment :incOme to

their

DI1!::1

activity.

Sta;r:x1ard. rate for profits in

excess

of BFR 16 000

000. This

:rate

wiD. be

reduca:l to

41% from 1

J8lIUB.I'Y 1991 ,

am. to

from

1 Ja.nu.a.ry 1992.

Stamard rate for

profits in excess of LFR 1 312 001; an addi

tionaJ.

cba.rge of 2%

is due .

for the employment f'urrl

, l:e.sai on the

amount of

corporation tax.

In

:f'u11 discha.rge

of tax , i flhi .

, ;

ty .

J:X)es DOt

apply to di

v:i.derrls

distributed by

I.mrembourg hold.i:og

compani as .

With coupon sta. tement.

1~

of the tax on

distribute:l profits..

FOI.1r rates are applied:

Shares quotei on the Athens stock exc'ha.DQ'

Shares DOt quoted

on the Athens

stock

:bearer sha.res 46% 8m:.

registere:i sha.res 42% 47%

National rate of tax

(~)

plus 1000.1 tax, or ILOR, at 16.

'!be tax c:rati.

t re1a.tes on1 Y to the national tax of

(30)

11.

12.

13.

Stan:la.rd

rate at Federal level for profits not

exoee:iing $100

CXXJ.

State am

IDUnicipa.l taxes must

be

a.ddOO. to Faie.ral tax. In the

oase of New York, for iDst.cmoe, the overall rate is 45. 25%

At Fe:1eral level, the tax is

caJ.cula;tej. on the

1:as1s of the

ratio

(%) of taJrable profits to e;ru.1 ty . Ra. tes are progressi vean:l rapg

from 3.

6.$ to 9.

8%. To this abarge must .be a.ddOO.

oantonaJ., church

ani

IIIIlIdcipa.l taxes,

which range from 7. 8% to 22

. 6%

ani are

de1uct1b1e from the base for Fe:1eral tax pu.rposes.

In the case of ZUrich, for 1Dsta;ooe, the cambina.tion Of the

various

rates

proiu.oes an

overall

t.aJt. rate of between 11.

1% am

30. 2% .

National tax rate.

(31)

I FI CHE

ObJet

: ProJet

de

communication de

la

Commission au

Conge! I

, au

Parlement europ6en et au Comlt6 Economlque et Social sur

las

orlehtatlons en mat

litre de flscallt6

des entreprlses

fiche f I

nanc I ere

Introduct Ion

La fiche flnanclere est necessalre comme complement a I'

annonce dans Ie

projet de communication des imp

I I cat Ions

budg6tal res de

la

creation d'

un "

Comlte"

(groupe d'

experts)

constitue de

personnallt6s

Ind6pendantes dont

la

comp6tence en

matiere

flscale est

reconnue et qUi sera amene a remettre une etude

dans un delal d'

un an en

repondant aux pr inclpales quest Ions cltees au paragraphe 34 de la COmmunication

II est envisage de conclure avec ces personnalltes des contrats

de

prestatlon de

services,

eventuellement Indivlduels, de

manlere

a remunerer sur base des contrats-types ex Istants les travaux des membres de ce " Comlte" ; leg credits operatlonnels de la DG XV (87752) et/ou la dotatlon de la DG XV sur Ie posta A2600 devront etre ut Illses a cette fin

ce "

Comite"

, en reallte un "

groupe d'

experts

" de la Commission, sera appele a se reunlr a plusieurs reprises tout au long de

ses travaux ; leg credits disponlbles sur Ie poste A2500 en

dotation de la DG XV devront etre utilises pour

couvrlr les

frats de voyage, d'approche et de sejour de ces experts prlves.

Gradi ts

nacessa Ires

(a) credits d'

engagements pour

la

conclusion de

contrats

prestat ion de service pour la

remise d'

une etude

I I est

pravu de conclure 5 contrats d'une duree de douze morsel raison de 20. 000 ECU par contrat

total

: 100.000 ECU a Imputer sur leg cr6dlts d'engagement pour

I 'annee 1990 du posta

87752; s

I necessa

I re un

renforcement de ces postes sera deman6d en temps utile.

(b) frals de convocation pour

la reunion de ce "

Comlta"

II est

prevu de

convoquer ce

gr()upe d'

experts pr

Ives a 6

repr Ises

tout au

long de

la duree de

cas

travaux dont 4

convocations durant "

annee 1990

total

: 12.000 ECU a lmputer sur leg credits du poste A2500

(dotat Ion

1990) pour

Ie

remboursement des

fra I s

de

voyage,

approche et de sejour de ces experts

Figure

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References

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